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TokenMarket is pleased to announce that it will be able to offer a generous discount for the upcoming Becon Global event taking place in London next week.

Hosted by CMS Law the upcoming The Future of Finance event, which takes place in London on June 6th will see some of the greatest minds in law, blockchain and tokenised securities come together in order to discuss the future of tokenised assets.

Ryan Hanley, UK Managing Director of TokenMarket Technologies Ltd, is set to speak at the London event, giving the audience an “Introduction to Security Tokens.” After a successful keynote in New York at Becon Global’s first event, Hanley is excited to give UK and EU audience members an insight into the world of tokenised securities.

Having gained vast insight into the world of raising capital through the blockchain space, Hanley has been able to help facilitate more than 30 disruptive Startups raise more than £240m. Giving users a deeper insight into the world of tokenised securities, Hanley will be able to discuss some of the common misconceptions that this new form of fundraising method and share has around it.

Other guest speakers include Timo Lehes, President at Swarmfund, Gordon Einstein, Partner at Cryptolaw Partners, Nils Veenstra, CEO at New Alchemy and Elizabeth White, CEO at The White Company as well as many more.

Attendees can also expect to hear and discuss other interesting and insightful topics in the tokenised securities space including: security tokens, how to issue tokens in the blockchain, regulation and governance, an investor’s perspective on tokenised securities, developing an ecosystem for digital real estate assets and the role of stablecoins.

TokenMarket is pleased to give its users an exclusive 70% discount using the code: TokenMarket when registering to buy a ticket.

Follow the link here to find out more and to claim this generous offer.

May 23, 2019 – The world of VoIP communication makes it easier for people to reach each other without spending as much money as what people have spent in the past. The Zoptax project is a blockchain-based solution that makes it easier for people to communicate with others with ease.

The Zoptax blockchain program is a VoIP network that is currently in development. A prototype app is available through Google Play. The ICO Pre Sale for Zoptax will be going live on May 25 and Public sale will start on 15 June on exmarkets.com.

Zoptax focuses on being a fully decentralized VoIP network. The design helps people to stay connected with others and not worry about interruptions from centralized authorities.

The most important part about Zoptax is that this entails no possible security breach issues. The work involved ensures that people are protected at all times and that there are no problems with what might be utilized when reaching other people.

The coming ICO for Zoptax will help with promoting different plans for making products more appealing. This includes providing people with tokens for things like new activities. The tokens produced here are based off of regular use of the Zoptax app.

The app can work on various mobile devices, although dedicated phones are expected to be introduced in the future. These outstanding app features will facilitate a thorough process for handling different plans for work. The best part of the VoIP setup is that the design will work throughout various networks and can ensure people don’t have to get access to other extra functions.

The general web and desktop application for Zoptax is expected to be released in September 2019. Further mobile apps will be released a year later. The blockchain source will be publicly launched in 2022. The general road map for the program is expected to ensure that actions in the market will go forward well without details being too thorough.

Information on what Zoptax will be doing in the future and how the ICO will work can be found online at zoptax.com. The Zoptax site features a full ICO white paper explaining what people can expect out of the ICO and the app itself.

This is a paid press release, which contains forward looking statements, and should be treated as advertising or promotional material. CryptoRadar.org does not endorse nor support this product/service. CryptoRadar.org is not responsible for or liable for any content, accuracy or quality within the press release.

TokenMarket and Coinfirm are to host a private event taking place at the Malta AI and Blockchain Summit taking place later this month. The event, the latest in TokenMarket’s security token event series, will discuss how security token exchanges will work alongside current markets.

Taking place at the Hilton Hotel, St. Julians on May 22nd 2019, attendees can expect an insight into the world of security token exchanges, as well as the opportunity to hear from TokenMarket‘s own UK Managing Director Ryan Hanley, CEO Ransu Salovaara and CTO Mikko Ohtamaa.

Currently early-stage growth capital is an estimated £77 billion-a-year industry which currently is predominantly 95% venture capitally funded. As of December 2018, the global VC industry value was estimated to be around £124 billion, trebling its value from a decade prior with funds such as Masayoshi Son’s SoftBank have an estimated $100 billion to spend on projects in the future. At TokenMarket our investment platform gives our investor base the right to research, buy and trade the next tech unicorns.

In the UK in 2017 alone, £333 million was raised through equity crowdfunding, however, less than 0.005% of UK equity crowdfunded companies ever list on a secondary market.

There is a huge void in capital markets for a new SME secondary market, which would give shareholders the right to exit or maximise their assets before an IPO or forced corporate buyout after later rounds.

TokenMarket has now built a fully decentralised exchange currently applying to establish in the Dubai International Financial Centre (“DIFC”) a Category 4 investment firm as a licensed broker/dealer and establish in Malta a class 4 virtual financial asset license.

We’re delighted to be joined by our partner and co-hosts Coinfirm which provides industry-leading AML solutions and blockchain analytics for SME’s to larger institutions worldwide. We welcome Pawel Kuskowski, CEO at Coinfirm who will shed light on the current regulatory challenges digital asset exchanges now face and how blockchain analytic solutions can help solve them.

The four-day conference, which is set to run from Wednesday 22nd May – Saturday 25th May, will see members of the blockchain, artificial intelligence and future financing community come together at the Hilton Hotel to discuss the latest news in the space.

With over 8,500 attendees from 200 countries, as well as 200 speakers, present at last years summit, the 2019 edition of the upcoming event is set to be a sellout.

TokenMarket’s CEO, Ransu Salovaara, CTO, Mikko Ohtamaa and UK Managing Director, Ryan Hanley, will all be at the event to meet fellow members of the wider community.

Joining the likes of cryptocurrency entrepreneur Brock Pierce, venture capital investor Tim Draper, Ethereum board member Vinay Gupta and robotics professor Noel Sharkey, the TokenMarket team will be there to discuss the world of security token offerings (STOs) and engage in an interesting conversation with fellow attendees.

Upon the announcement of the attendance, Ransu Salovaara stated:

“The Malta AI and Blockchain Summit is one that we look forward to every year. The high calibre of both the speakers and the attendees means that it creates a perfect environment to meet likeminded people and discuss the future of disruptive technologies. We are excited to be heading back to Malta and are looking forward to the conference.”

If you are attending the conference already make sure that you say hello to the TokenMarket team.

The four-day conference, which is set to run from Wednesday 22nd May – Saturday 25th May, will see members of the blockchain, artificial intelligence and future financing community come together at the Hilton Hotel to discuss the latest news in the space.

With over 8,500 attendees from 200 countries, as well as 200 speakers, present at last years summit, the 2019 edition of the upcoming event is set to be a sellout.

TokenMarket’s CEO, Ransu Salovaara, CTO, Mikko Ohtamaa and UK Managing Director, Ryan Hanley, will all be at the event to meet fellow members of the wider community.

Joining the likes of cryptocurrency entrepreneur Brock Pierce, venture capital investor Tim Draper, Ethereum board member Vinay Gupta and robotics professor Noel Sharkey, the TokenMarket team will be there to discuss the world of security token offerings (STOs) and engage in an interesting conversation with fellow attendees.

Upon the announcement of the attendance, Ransu Salovaara stated:

“The Malta AI and Blockchain Summit is one that we look forward to every year. The high calibre of both the speakers and the attendees means that it creates a perfect environment to meet likeminded people and discuss the future of disruptive technologies. We are excited to be heading back to Malta and are looking forward to the conference.”

If you are attending the conference already make sure that you say hello to the TokenMarket team.

The ICO revolution has commenced. For companies utilizing blockchain technology, ICOs have now become a preferred route for fundraising. It is an excellent option for companies to best offer the utility of whatever their respective product or service actually is, to a large group of people. On any given day, there are numerous ICOs releasing. Therefore, it is critical that a company differentiate itself and market its ICO effectively. Yet, the strategies for ICO marketing are constantly changing. What was effective last year, may not be as effectual this year.

In this article, four crypto marketing experts provide valuable tips for ICO marketing.

“Where do you find the largest collection of cryptocurrency fans and investors? At crypto seminars, events and conferences happening all over the world. Many of these conferences are always looking for speakers so it’s your chance to prepare your best pitch and present it to a large audience. However, don’t be overly promotional at these conferences and make sure you provide value.”

Amine Rahal, CEO of IronMonk, a leading digital marketing agency with a vast experience in ICO marketing.

The Four Top Ways To Market Your Company

“As Bitcoin is gaining its followers and investors, so are many new ventures working their way in the market by introducing some new technology to kickstart their business. More and more business and preparing themselves to introduce “Initial Coin Offerings”, or ICO.

The marketing of any crowdsource or crowdfunding business is difficult. The following are the top four ways you can market your business to investors and to the consumers:

Learn the rules, as per SEC [Securties and Exchange commision] suggests that some of the cryptocurrencies are actually securities. Understanding the rules might help you in sustaining the business.

Update your website, as the marketing on social media, is important, same goes for the website. You customer or visitors might visit your business website and he or she might find something interested.

Have a solid team, as nothing shouts “Scam” when you have an anonymous team. Make sure the team is presentable and should have an About Us page on your website.

Build a brand. Brand awareness and community building are two of the main focuses of this business to create transparency. Transparent businesses are crucial because it removes fears from investors who are investing in the business.”

“I believe that the biggest boost an ICO can get is by integrating a KYC/AML solution. It will not only help in generating positive hype about the responsible and transparent tendencies of the ICO but it will help build a positive relationship with regulators and compliance bodies that are otherwise not very enthusiastic about the prospects of an ICO. To explain the impact of using services from a KYC/AML service providers, I will quote the example of Ontology. The base price of its utility token jumped from $2 (more than 10%) overnight as soon as it was announced that they have partnered with Shufti Pro and their market cap reached the phenomenal heights of USD 425 Million.”

“Select the venue and audience for your offering, carefully. There are complicated legal considerations related not only to which country is the domicile for your ICO, but also who are the target participants (buyers of your tokens) in your offering.

Consider whether or not you intend to incorporate a rigorous Know Your Customer/Anti-Money Laundering (KYC/AML) screening for your buyers. You should understand not only your initial buyers but also the requirements of the secondary market that they may sell their tokens to. If you do not have a KYC/AML program, your token buyers may be precluded from selling their tokens to buyers in most developed countries.

The days of white papers that contain no substance are over. While there are few laws about what a white paper should contain, the maturing of the ICO industry demands that white papers provide substantive information about the offering and why it is likely to succeed.

Good ideas aren’t enough if the offer does not have a credible management team that can not only develop software, but can also market the product and manage the business. Note that there are many laws on what a white paper should not contain.”

“Just a few years ago, an ICO marketing strategy may have taken this well-worn path: build a community on Telegram and for projects that wanted to feel a bit fancy, throw up a few social media ads. Come 2019, that’s amateur hour.

For ICOs—or as is “en vogue” these days, the IEO and STO—to get true traction and investor confidence, a full-fledged public relations/investor relations strategy is the way to go. Too often, marketing tends to be an afterthought with initial crypto offerings. Developing a marketing approach centered on telling a story and building relations with key members of the media, especially in the early stages of the project, will help ensure your offering gets the continued attention through all stages of the business life cycle.”

The popularity of cryptocurrencies and blockchain technology has risen at an exponential rate over the past few years. More companies than ever before are turning to ICOs as the preferred method for attracting investors. Yet, a crucial element sometimes lost in the race to market an ICO, is the technology itself. If a company doesn’t have a legitimate reason to be on the blockchain, then it shouldn’t be there in the first place. Despite ICOs being an easy method of attracting investment, a better option for some start-ups is the conventional route of venture capital. Considering that this space is still regarded as the “Wild West” in many respects, strategies are consistently shifting. However, one fact remains true – branding is crucial. The esteemed Warren Buffet surmised it best when he said that if given the choice between making money, and the brand, always choose the brand.

Binance has announced that it was “hacked” this morning. They have had close to $40.7 million USD, around 7000 Bitcoin (BTC), worth of unauthorised withdrawals happen on its exchange. However, I am not so convinced.

Why do I think this is not a hack? What does the media have incorrect?

“Hackers were able to obtain a large number of user API keys, 2FA codes, and potentially other info. The hackers used a variety of techniques, including phishing, viruses and other attacks. We are still concluding all possible methods used.”

If it was the user’s API keys that were compromised then it is nothing to do with their own infrastructure. It is the user’s responsibility to protect their own IT equipment and ensure that they are safe from security threats. In this case, it is also more than likely these users were using a third party trading bot service, either a hosted one online or one that is downloaded to a PC.

Here are some facts supporting this theory:

This is not a generic phishing/consumer hacking as the perpetrators could have spread withdrawals over a long time

Third parties/trading bot makers are not tech savvy enough to protect their systems with customer API keys

An insider job from someone at Binance seems unlikely as the hot wallet was only partially emptied

A trading bot service has been compromised and yet Binance has ended up bailing them out for the $40 million USD which has been stolen from its exchange.

A clever hacker would have mixed his own funds in with the “stolen” funds and call it a hack as a form of “friendly fraud” in order to get some additional money. If it is a third party who was using API keys then Binance cannot know if this is just a conspiracy and not a hack.

Binance could have more manual withdrawal checks in place in order to ensure that the funds were protected. $40 million USD might not be that much for Binance, but it is still a lot of money to be stolen from the world’s largest cryptocurrency exchange.

The long term solution for the cryptocurrency industry is to have more checks and controls in place. In the ultimate form, this means more regulation. Under the regulation, third-party services with weak security touching client money would not have been allowed to operate in the first place. Perhaps with Binance not being as safe as everyone thought, this regulation will come.

The most important innovation in traditional financial products over the past two decades is undoubtedly the rise in (what I will call) “securitisation wrappers”: essentially, securities (for example, debt, equity, derivatives and mutual fund units) that provide exposure and access to an underlying asset. The successes of this financial innovation created the Exchange Traded Fund (ETF) industry, a $3 trillion business that has democratised access to a wide range of financial assets at unprecedented low costs; its failures, however, introduced Collateral Debt Obligations (CDO’s), and a 2008 financial crisis that nearly brought modern banking to its knees.

Investors have learned a lot over the past two decades, with the most important lesson being: “Trust, but verify”. In particular, they have learned to focus on the operational risk of the securitisation wrapper as well as the market risk of the underlying.

Digital assets represent the next stage in the evolution of securitisation wrappers. They not only promise increased operational efficiencies – better liquidity and more transparency; they also speak to a belief in the mass adoption of transformative DLT and digital asset technologies and real concerns about the dangers of fiat currencies and inflationary monetary policies. Since the launch of BTC in 2009, digital assets have grown from a technology niche to a multi-billion dollar industry, and tokenisation is increasingly expanding into traditional financial services.

Digital assets would be well served by not only disrupting financial services, but also by learning some of the lessons that drive the need for that disruption. And we are seeing that, to some degree:

regulation is no longer seen as the enemy;

unregulated ICO’s are self-limiting, leading to the rise of regulated and compliant STOs;

service providers such as custodians are professionalising, adopting financial industry standards and complying with regulatory requirements; and

exchanges are implementing market surveillance and KYC/AML processes.

We Need to Talk about Tether

Nevertheless, problems remain. To be blunt, the industry needs to talk about Tether (USDT).

It would appear that despite some very clear problems, the digital asset community has decided to close its eyes, put its hands over its ears and stamp its feet while screaming “I can’t hear you” to anyone who dares point out that this is a serious issue.

And I am not talking about the criminal allegations, on which I have no comment. What I want to discuss is to examine the facts behind the serious defects in Tether’s structure.

What is Tether?

Tether is neither an entirely new currency, nor an entirely new asset class. Rather, it is a clever solution to a problem that has long plagued financial services: how to “securitise” cash such that it can be moved quickly, efficiently, and at a low cost even if held in large amounts. For example, money market funds (funds that track the value of the USD while at the same time providing a yield) were introduced to solve some of these problems in traditional financial services, just as Tether (and other stablecoins) were introduced to solve them for digital assets.

Tether provides a convenient “on-ramp” to exchanging USD for crypto currencies. It is meant to track the value of USD on a 1:1 basis, and was initially promised to be 100% backed, 1:1 by USD; i.e., for each Tether issued, a corresponding 1 USD would be received and held to support it. And when the Tether coin was sold or redeemed, 1 USD would be paid to buy it back. Ideally, then, for every Tether in existence, there should be a corresponding USD that “backs” or supports its value. Tether is by far the largest, by dollar holdings, of the stablecoins issued and therefore presumably also the most used.

So Far, So Good, Right?

Tether is issued by Tether Holdings, which is an affiliate of Bitfinex, a well-known crypto exchange. And while Tether apparently was started with the best of intentions and everyone meant to ensure that each Tether really had a USD backing it, Bitfinex recently admitted that wasn’t quite the case. Instead, they reluctantly disclosed that it was backed 70-some odd percent by USD and the remainder by an unsecured loan between BitFinex and Tether Holdings. Bitfinex apparently borrowed some of Tether’s reserves to cover its trading operations. That discrepancy amounted to around $850m, which means that around a third of Tether holders haven’t done anything but lend Bitfinex around $850m of cash for operations, with zero security or collateral. (To be fair, I don’t consider Bitfinex shares to be real collateral, since Tether will only go under if Bitfinex goes under, and if Bitfinex goes bankrupt, those shares won’t be worth anything). To put that in context, it is not all that different than the time a whole bunch of people were allowed to borrow a whole bunch of money to buy houses for far more than they were worth with no proof that they could pay the loan back.

Why This Represents a Flaw In Tether’s Structure

In general, for a securitisation wrapper to track an underlying on a 1:1 basis, investors have to be confident that it is 100% backed by the underlying asset or by another instrument that provides the same exposure. That is a very basic requirement and to be fair, one that Tether presumably satisfies: it is allegedly now backed by 75% of cash or cash substitutes and 25% by an unsecured loan between Tether and an affiliate.

But, while that backing is clearly necessary, it is by no means sufficient. Indeed, post 2008, financial products have evolved dramatically to ensure that a wrapper is not only nominally “backed” by assets, but also that it manages the risk around that backing. What are those risks?

That the assets don’t exist. Fairly simple but a fundamental concern. There should be independent, verifiable audits of the underlying assets.

That the assets cannot be used for other purposes: The assets should be segregated and only used to provide the backing for the wrapper;

That the investors don’t have a valid, independent legal claim over the assets. Investors should have a valid legal claim to the underlying assets, whether directly or through some form of trust structure.

That the assets are not bankruptcy remote. In short, that in the event the provider or any of its affiliates goes bankrupt, their creditors do not have a claim on the assets.

That the structure fails to mitigate credit risk: If the assets do involve a loan or other credit risk, that risk should be collateralised and the collateral should be held for the investors.

Does Tether manage any of those risks? It doesn’t look like it. Presumably Tether’s assets do exist (otherwise how would Bitfinex been able to appropriate $850m of them), but Bitfinex was able to control Tether’s assets with no independent oversight and to use them for its own purposes unrelated to Tether. Even a cursory read of Tether’s terms show that holders have no legally recognizable claim on Tether’s assets and that they aren’t bankruptcy remote from either Tether or BitFinex credit risk. And the Bitfinex – Tether loan is for all intents and purposes uncollateralised (for reasons explained above). Not a great structure, and definitely not one that would pass any basic diligence by a seasoned investor.

And Yet…

And yet, it appears that as it stands, the digital assets community doesn’t care. Tether still tracks the dollar; it remains the largest stablecoin by dollars held, and it continues to attract significant volumes. But this is a dangerous attitude.

Is the diligence boring? Yes. Is it overly technical? Probably. Nevertheless, it is the type of analysis that experienced investors engage in every day when they buy financial products, and with good reason.

Ignoring these risks means choosing convenience over security, complacency over diligence. It is the sign of irrational confidence: that people will keep using Tether; that the next buyer will also ignore the risks; that the party will continue as long as the music doesn’t stop. And anyone who was around in 2008 knows how that plays out for these products: first, the money flows out in a trickle, while prices and liquidity remain relatively stable; then that trickle becomes a torrent, as people panic, the price tanks and liquidity dries up and finally, that torrent becomes a flood, wiping out anyone and everyone left. And like that, $3bn can simply disappear into the ether, with investors holding something that doesn’t trade, that no one will buy and that has no value, wondering why they were so confident that the party would never end.

London, England – April 25, 2019 – TokenMarket is thrilled to announce that Townsend Lansing has joined the team as Chief Commercial Officer. With over 17 years of experience in financial services, Lansing will work closely with TokenMarket senior management to scale the TokenMarket platform and increase adoption of tokenised securities across the investor landscape.

Lansing recently served as Chief Commercial Officer of Arkera.ai, a fintech startup focused on connecting self-directed investors with investment ideas and products. Previously, he spent almost a decade at ETF Securities, an ETP provider focussed on commodities and other alternative assets. Across several leadership positions, he held direct responsibility for the firm’s ETC offering with combined assets under management (AUM) of $18bn, while also serving as a strategic advisor to the CEO and Chairman. Prior to ETF Securities, Lansing was Vice President of New Product Development at Bank of America.

Upon the announcement of his appointment as Chief Commercial Officer, Lansing stated that:

“Digital Assets and associated technology are transforming capital markets and financial services, and TokenMarket, with its innovative tokenisation platform and well-respected brand, is very much at the forefront of that disruption. I look forward to working with the team to build out a first-rate platform for technology start-ups looking to raise capital through security tokens.“

On the appointment of Lansing, Ransu Salovaara, TokenMarket CEO and Co-Founder stated that:

“Having someone of Townsend’s calibre join the TokenMarket team is a fantastic step for us. His extensive experience in both traditional capital markets, as well as asset management, will drive growth and help us continue our goal to disrupt capital formation for technology startups. I am excited to see the impact Towsend will have on our growing business.”

“Custody is the care and keeping of anything. A custodian is an AGENT that performs various duties on behalf of a client, including holding securities in safe CUSTODY, executing financial transactions under specific instructions, and collecting periodic CASH FLOWS from investments.”

Now that’s exactly what our tokenised custody company does. This definition was written and published in 1910, just short of a century before Satoshi published his whitepaper on Bitcoin. I don’t think they were too worried about hackers in 1910, but they probably knew about risk management.

When applied to digital assets, custody simply means the creation, safekeeping and administration of digital asset wallets (keys) for a client. It means that the client keeps the ownership of the assets, but the custodian has possession and control of them.

Let’s look at the reasons why custody is needed in the digital asset space.

Risk Management

A hundred years ago, they knew that the segregation of duties worked. It kept some form of objective check and balances in place in a process in which participants handled other peoples money and assets.

The segregation of duties was a risk management measure before any computers were used in financial services. Since then it has been a standard accepted practice of the financial industry for decades, for a reason.

Today, however, new questions have begun to emerge. Can technology make this ancient risk management measure obsolete? Can technology provide advantages that change the established structures and roles of the financial industry? Can’t we just be our own banks?

Be Your Own Bank, Until You Make It

Being your own bank is great, up to a certain point. It’s fun to talk about digital assets and show off your mobile phone to friends with a couple of thousand dollars worth of bitcoin on it. It’s still kind of fun if the balance reaches ten thousand dollars, but you might not show it to as many friends anymore at that point. If the value reaches one million or so, I don’t think it would be fun to walk around the city with the phone in your pocket at all. It’s probably pretty scary even to have the phone in your bedroom drawer, even if it’s switched to aeroplane mode. Now imagine the tokenised assets on your phone wallet belongs to your client.

Let’s look at companies instead of private investors. How would you feel about your external asset manager asking you to drop your money to his office in cash notes, so he can then start investing it to various assets? Maybe you can decide what to invest in, and he will just go and pay your money to the seller for you. What if that asset manager is not an asset manager at all, but an IT startup? Well, we’re pretty close to the description of how digital asset brokers and exchanges work, until they disappear, get hacked or get their assets seized because of money laundering suspicions.

Maybe the regulatory requirements of licensed asset managers to use a third-party custodian for client assets are not that annoying after all. The next question is if you are not required to have a third party custodian, why would you? Would you wear a seatbelt if you were not required to do so?

Emerging regulation

Just this week two promoters of the notorious OneCoin appeared in court in Singapore. One of their arguments, if I remember it correctly, was convenience. OneCoin was ‘better than bitcoin’. If an investor just gives money to an IT startup and lets the unregulated company assume all the roles in the market, order matching, liquidity provider, market maker, auditor, custodian, broker and trading platform developer, then everything runs just great, and it’s really convenient, right? Not exactly because that’s how all Ponzi schemes run.

Is custody starting to make sense yet?

Let’s look at the traditional financial market, and how it’s structured. We have a central securities depository (CSD) for the safe-keeping of investment products, a central counterparty (CCP) providing clearing services and to mitigate the counterparty risk between traders and a securities settlement system (SSS) enabling the transfer and delivery of securities.

The market participants connect to these service providers for orderly trading, for the protection of their clients and themselves. The market participants don’t hold their client assets because they don’t want to be held accountable if the assets disappear. If you are interested in 188 pages of details about the reasons for this traditional structure read the Principles for Financial Market Infrastructures by the Bank of International Settlements.

These are the types of checks and balances that both regulatory authorities and institutional market participants are familiar and comfortable with. They are not familiar and comfortable with ‘trustless systems that replace intermediaries with maths’ or with comments like ‘there’s no need for custody because the assets are on the blockchain’.

For the regulatory authorities, this simply won’t work.

Technology vs Law

The current regulation of financial services is compatible with the digital assets, as long as asset managers understand that if their clients think of tokens as assets, the asset managers should treat these assets like any other asset class, with all the normal checks and balances in place.

For auditors, custodians, insurance companies and fund administrators, you do not need to bend the rules and principles of asset management just because you are dealing with a new asset class. Yes, it works to some extent, but at some point, you hit the limit in the quantity of money and people that are ready to take the risk in the name of new technology.

I think we hit this limit in the last crypto rally, and now we’re back to building better solutions that can scale. And by scaling I don’t mean transactions per second, I mean proper asset protection. There was no way an average investment committee for a pension fund would allocate any money to products where the manager did not know where the assets were.

Regulations on investor and asset protection won’t change because of the tech-heavy nature of a new asset class. In fact, it will most likely have quite the opposite effect because everyone wants to (or should) be extra careful. Think what’s happening with cloud regulation and data sovereignty. If countries think it’s safer to have data stored in onshore datacenters, do you think they would easily accept the concept of ‘storing security tokens in the cloud’ or on-chain’?

If we believe in technology we should understand that technology can adapt to regulatory requirements quicker than regulations can change due to advances in technology. We should also understand that restricting functionality, convenience and the movement of assets, we increase security, and protection of the assets. Offline is more secure than online. Ask any cybersecurity expert or insurance company.

Institutional Infrastructure for Digital Assets

I like the term ‘institutional infrastructure’ because it has some weight to it. It can’t just be a guy and a laptop. With custody, it means heavy doors, security guards, body scanners, access passes and keys. It’s also different from escrow. Escrow can be done in about two minutes on a Trezor of a blockchain enthusiast lawyer.

There’s no such thing as two-minute custody. Custody is long term safekeeping, because you want to use the value for trading, but not lose the asset. Institutional asset managers can talk all they want about market risk and trading strategies, but it’s a material omission not to consider the safety of the assets from risks not related to the market.

Final Thoughts

Using a custodial service for the monitoring, storing and safekeeping of the next generation of digital assets should be a no-brainer. That’s where DAVOS Custody can help, and that’s why we partner with leading token platforms like TokenMarket.

Together, we want to create a new marketplace with traditional security measures. We want to build the infrastructure that will allow this space to thrive and by applying measures like custodian services, we are sure that we can.

Author

Ville Oehman is a co-founder and CEO of DAVOS Custody, a Singapore based purpose built custodian for digital assets, hard assets and tokenized assets. Before starting DAVOS, Ville was one of the first licensed asset managers in Asia, managing a regulated long-only mutual fund investing in equities and digital assets. Ville has been active in the digital asset space since 2013.

DAVOS Custody (www.davos.sg) is a third-party custodian for digital and tangible assets, including tokenised assets, with tailored insurance coverages available. Founded by a team of experts in fund management, cybersecurity and financial regulation, DAVOS was the first blockchain company to apply for the Capital Market Services license for Securities Custody in Singapore, setting it on an industry-defining path to becoming a qualified custodian for securities and security tokens.